Forever Stamps went on sale in April 2007 for $0.41 each and are good for use as First Class stamps . . . forever. So in April 2008, a month before the price was to change to $0.42/stamp I prepared an analysis of an investment in Forever Stamps.

Taking this historical cost of stamps I charted the real and nominal price of a first class stamp since the beginning of the US Post Office. Then, I figured out the annual average increase in the cost of sending a one-ounce letter (not including inflation) was 3% per year with a standard deviation of 0.09. If one was to hold the stamps for 10 years then they could have earned 14.3% on their money. To make the changes in value more recent, I considered only a 10-year moving average, which had an average annual increase of 2.67% with a standard deviation of 0.01. Taking this in to consideration, if you were to hold the stamps for 10 years you have made only a 12.36% gain on your money. All of this assumes that there is no spoilage and that the stamps are sold at 100% of their value (e.g. you use them yourself). Currently, stamps are increasing in value per their historical average, rather than their average in the last 10 years.

Though some people think that investing in Forever Stamps is a bad idea, I think that it is an o.k. investment. After all, the USPS will not allow their stamps to be worth less during hyperinflation. Also, as First Class mail is used less the price of a stamp will likely rise faster than inflation.

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